New Brunswick’s GDP growth chimera

I see TD was in Moncton yesterday predicting that New Brunswick’s GDP will increase to 1.5 percent next year after running at 0.5 percent this year.   Later in his speech he talked about how the province’s population will be in decline between here and 2021.

I continue to come back to the fundamental question – maybe the chimera – what level of economic growth does NB need over the next decade and what, if anything, can we do collectively, to influence that rate of growth?

I can’t get anyone to commit to a number.  Is it 2 percent per year?  Three percent? Four?

A decade ago we could at least expect 1.5 to 2 percent real GDP growth in an average year.  Since 2008, it has averaged around one half of one percent.  I contend that New Brunswick’s economy will be highly unstable at a long term growth rate of under one percent.  By this I mean it will be virtually impossible to balance the provincial books, keep a good quality of public services and limit outward migration of workers.   I suspect if anyone actually crunched the numbers we likely need in the range of 2.5 percent per year when all things are factored in.

And this population issue.  How can you have moderate GDP growth with a declining population when 60% or more of your economy is related to household spending?   It seems to me virtually impossible to have strong GDP growth in a declining population environment – unless you are Newfoundland and are pumping massive oil and plowing billions into a tiny economy each year.

We need to get some fundamentals right and then we need to have a long conversation with New Brunswickers.

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4 Responses to New Brunswick’s GDP growth chimera

  1. Jeff Thompson says:

    Excluding recessionary times, I thought 2% GDP growth was considered holding the line. If TD’s forecast on GDP holds true, I would suggest growth under 2% will result in instability when you factor population decline, decreased tax revenues & and increased healthcare spending due to an aging population.

  2. Jeff Thompson says:

    Yes, we need to get fundamentals rights, but we need leadership to make some tough decisions, not continue having so called conversations on changes. The majority of citizens, in any province or state, would not agree to the fundamental changes required.

  3. mikel says:

    It depends on the fundamentals. I know numerous people in the forestry industry who state outright that pulp is a dying industry with fewer and fewer employees tied to far more rampant production (thanks to technology). I would put good money on if somebody did a forestry analysis on the current model versus more community/environmental/native models, that a different forestry model would VASTLY increase GDP. The current plans are quite insane, and have been for YEARS.

    You can EASILY get the ‘majority of citizens’ to agree to those ‘fundamental changes’, in fact at least the majority within those industries have been saying this for decades. Its actually you economic pundits who refuse to see these ‘fundamental changes’ as necessary. There are certain people who only see very specific policies and industries as being the ‘fundamental changes necessary’.

    Just the other day on the CBC they had a story about a small company which actually has 5 employees who operate out of a guys garage who sell maple backs to some of the biggest guitar makers in the world. They didn’t even have to go looking for customers, from years ago these guys came looking for THEM. But in case you don’t know wood, its because of the quantity of curly maple, which is almost inaccessible in the US, and is becoming increasingly so in Canada. That’s because its a hardwood, and in case you didn’t know, the province sprays herbicides to kill hardwoods in favour of the faster growing softwoods used by the dying pulp industry.

    In short, while there are lots of opportunities for that wood, they will be extinct BECAUSE of public policy decisions. I’m a wood guy, so I’ll just add that curly maple is one of those standout products that COULD have built a sustainable market which would have been invaluable both domestically and internationally. Again, as a wood guy I pay bucketloads of money in order to buy interesting woods, yet in Canada, like water for years, it is largely ignored just because trees are everywhere.

    It COULD have been like the cryptomeria which is used in pockets of Portugal and the Azores, where it is used locally to create distinct architecture (which attracts tourists-instead, New Brunswick, and Canada, has about zero architectural interest), or the Argan and cedar trees of Morocco which do the same. Yet in Canada its so underappreciated that a dining room table company I worked for sets aside any curly maple in order to be stained so dark the grain is unrecognizable. The owner told me that they featured a curly maple table top, and its so underappreciated in Canada that people preferred the table that was stained so black it might as well have been made out of plywood and painted black.

    Anyway, thats not COMPLETELY off topic, like I said, curly maple is also used by appalachian gun makers, and is prized by wood DESIGNERS. Yet the policy, which many commentators THINK the ‘majority of citizens would not agree to the fundamental changes required’, is to kill all the hardwood, let rot whatever is come across (and not even let other people harvest what is rotting) in favour of planting lots of weak, fast growing tree farms for a dying industry which only exists because of subsidies. And that is just ONE industry, so multiply those effects by a hundred-that’s how insane public policy is when it favours ONE company.

  4. I was talking yesterday with someone who works in refugee camps in east Africa talking about how members of the Somali community are finding a new home in Saskatchewan. If we were open and welcoming we could be building our population, increasing diversity, and creating ties with communities around the world. But no, when New Brunswick talks about immigration, it talks about luring back childten who have left to work in Alberta.

    It’s about getting the fundamentals right, as mikel says.

    Our major employers could support a significantly larger tax load, and could be contributing toward the diversification and development of the province, but a significant percentage of their earnings are reported in overseas tax havens. Everybody knows this, which is why there is no big rush to improve those profits through economic development.

    We have to get the fundamentals right. We are far from that now. I wish we could actually talk about this in a public forum, but I don’t think there are any public forums in this province where this sort of discussion is allowed. Even here, in this discussion, I feel like I have to walk a fine line.

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